Common Retail Employee Fraud Trends and How to Combat Them

Employee theft is a huge threat to companies today. Business owners of all sizes and industries need to be aware of common threats so they can put preventative measures in place to stop them.

Fraud can be particularly impactful on a small business. Small companies are typically victims of employee theft because they have fewer controls in place, which can make them more vulnerable [1].

Here are a few common retail employee fraud trends and what you can do to stop them from affecting your business.

Collaborative Theft

How it happens. Employees allow friends of family to shoplift or give them things for free or at a low price. The employee may ring up items the person is buying, but not all the items, therefore allowing them to steal.

Employees at both distribution centers and physical store locations preparing packages for shipping may also put in extra products for friends or family.

How to stop it. It’s essential to have point-of-sale (POS) transaction monitoring in place to prevent this type of theft. You can also be very clear with employees about policies surrounding theft. In addition, checking weight data can help you stop shipping fraud.

Gift Cards

How it happens. The employee activates a gift card for a real customer, but then gives the customer a gift card that hasn’t been activated. The employee still processes the transaction so everything looks legitimate in the system, but they pocket the activated gift card.

Employees can also run a fake return and then place store credit on a gift card. They can issue these cards to family and friends and put large amounts of money on them.

How to stop it. More small businesses are using gift cards now, and based on a survey of over 1.4 million employees, 1 in 35 was apprehended for theft from an employer [2]. Therefore, it’s essential to have an inventory system in place for both returns and gift cards. Do audits of these practices regularly—if one staff member is issuing a large amount of gift cards, this could be a red flag.

Merchandise Theft

How it happens. Employees can manipulate inventory to make it appear as if an item was never delivered or stocked. This is typically easier to do at larger stores, and most stores have ineffective inventory systems in place to begin with.

How to stop it. Manipulating inventory cost the US retail economy $46.8 billion in 2017 and that number is increasing [3]. Having cameras installed in your stockrooms and improving your inventory system can be helpful in preventing this type of theft.

Fake Cash Returns

How it happens. A staff member will find receipts from actual purchases, usually choosing receipts with expensive items on them. The employee will then process a return for these items and keep the cash from the register.

How to stop it. It’s important to audit returns and look at the time they’re occurring. If a lot of returns are happening during slow traffic times, cross reference these transactions with the employee conducting them. If a staff member is issuing a large amount of returns or returns during slow times, this could mean theft.

You can also put a policy into place that requires a second employee to check and restock the returned item, which could deter employees from attempting to steal in this way.

Credit Card Fraud

How it happens. While credit card fraud isn’t as common in retail stores, it can be hugely damaging to your business and its reputation. Employees can collect credit card information and then use that information to process false sales or returns and keep the cash or put the money on gift cards.

Employees also do this with mobile POS devices, such as smartphones that read credit cards, and it works best with repeat customers who wouldn’t necessarily notice an extra charge. Staff members typically do this with numerous customers.

How to stop it. Installing a POS camera behind the register can help identify suspicious employee behavior such as using the system frequently when there are no customers present. A locked system can also prevent or deter staff from accessing credit card information.

Don’t Let Employee Theft Impact Your Business

While most thefts are done by shoplifters and not employees, it’s still essential to be aware of employee theft. While most employees don’t steal from retailers, the ones that do can cause big damage to your company and its reputation.

By having simple yet effective monitoring systems in place such as POS transaction monitoring systems and stockroom cameras, you can help curb employee theft and protect your business and its assets!



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